Vancouver's property tax system has stabilized: report

Jeff Lee, Vancouver Sun02.18.2014

Vancouver's property tax system, in recent years so far out of balance that city council had to make a series of extraordinary shifts between residential and business classes to keep businesses from fleeing, has now stabilized, according to an independent property tax review commission.

Vancouver's property tax system, in recent years so far out of balance that city council had to make a series of extraordinary shifts between residential and non-residential classes to keep businesses from fleeing, has now stabilized, according to an independent review commission.

As a result, Vancouver "remains competitive as a centre for commercial investment" compared to the Metro region and the rest of Canada, the tax commission said in a report to council Tuesday.

The commission said for now it doesn't believe the city needs to shift any more of the tax burden from business property owners to the residential class. Instead, it says Vancouver must develop a series of "metrics" that over the long term will tell it when the delicate balance between tax classes is out of whack. That "early warning system" should have been developed years ago, commission chair Stanley Hamilton said.

Businesses now account for 43 per cent of the tax take in Vancouver, compared to 54 per cent for residential property owners. A decade ago, the rates were reversed, resulting in businesses complaining that they were paying a disproportionately high amount and couldn't afford lease rates in the hyper-expensive commercial real estate market. The shift has significantly helped stabilize Vancouver businesses, said Hamilton, a retired land economics and finance professor from the Sauder School of Business.

"The commission ﬁnds no evidence of an increasing business tax differential, or of business investment leaving to other municipalities in Metro," he said.

However, Vancouver still needs to apply a better way to help so-called "hot spot" properties — both residential and business — that experience unanticipated increases in assessed value far in excess of the norm, he said.

Hamilton said those properties are the ones where owners "open their tax bill and are faced with a 40-per-cent increase when they were expecting less than 10."

He said much of the problem arises from a "blunt" assessment method by the B.C. Assessment Authority that doesn't account for the nuances of the city's various neighbourhoods. The city uses the provincial assessment roll for apportioning its tax levy.

The commission recommended the city bring in a targeted five-year averaging system to help specific properties whose values unexpectedly rise more than 10 per cent over the class average. It says new construction and rezonings should not qualify since those property owners should expect assessments to rise.

One of the biggest critics of the city's tax structure, Sharon Townsend, the executive director of the South Granville Business Improvement Association, said she wanted to see the tax shift away from business continue. However, she said she will be happy if the city brings in a metrics system for measuring and keeping tax burdens between classes balanced.

"If the metrics are in place, we can stop making this political. If the metrics are in place, we can stop feeling like we're looking over our shoulders and the market will sort itself out," said Townsend, who is also a member of the Vancouver Fair Tax Coalition.

However, the Canadian Federation of Independent Business is disappointed the city won't continue shifting the tax levy away from businesses, which it says pays more than 4.3 times the taxes residential property owners pay for like-valued properties.

"I don't think the commission's report reflects the reality of how difficult it is to run a business in Vancouver," said Mike Klassen, the B.C. director of the CFIB. "You can't tell a business owner who is paying these high taxes that they are getting a fair deal."

The three-person commission was revived last year to do a followup to a report it filed in 2007 that led to a five-year tax shift program. Each year, city council moved one per cent of the business levy to residential owners, equivalent to a two-per-cent tax increase. The move was unpopular with the incoming Vision Vancouver council, which nonetheless agreed to honour the program until its conclusion last year.

"I think this is a good report that qualifies why the original actions were taken, and that in fact we are very competitive in Vancouver," he said. "I agree that there are 'hot spot' issues and I am pleased to hear of some of the commission's suggestions."

Louie said the provincial assessment authority also needs to do a better job.

"What we also heard is that the B.C. Assessment Authority needs to make some significant changes to the way they do their assessment evaluation for this to be truly meaningful," he said.

"What (the commission) has given us is an opportunity to perhaps blunt some of the flaws within the B.C. Assessment Authority process."

The commission's report can be found on the city's website at http://former.vancouver.ca/ctyclerk/cclerk/20140218/documents/rr1colour.pdf

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Vancouver's property tax system has stabilized: report

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